Goldman Sachs expects 11 percent returns from MSCI China in 2019

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FILE PHOTO: The MSCI logo is seen in this June 20, 2017 illustration photo. REUTERS/Thomas White/Illustration

LONDON (Reuters) - MSCI’s China index should reap returns of 11 percent in 2019, investment bank Goldman Sachs said on Monday, though it warned that the world’s second largest economy faced a challenging and uncertain macro backdrop.

“Our economists look for 6.2 percent GDP growth in 2019, led mainly by investment amid slowing exports and consumption, near-term balance of trade risks for dollar/yuan moving to 7.1 in early 2019,” Kinger Lau wrote in a note to clients.

A mix of growth/valuation, stabilizing equity demand and potential asset re-allocation flows from property could bring a bounce late in the first quarter, he said.

“We like China A shares given its favorable risk/reward and inclusion-provoked inflows,” he said, referring to the gradual inclusion of A-shares in global emerging market indexes.

Goldman is overweight on both China A and MSCI China, he added.

MSCI’s China .MICN00000PUS index has fallen more than 16 percent since the start of the year.